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The Reform of Working Hours System in People's Republic of China (PRC) Global Employers to Be Aware Following the Walmart Employees' Strike

Walmart workers across China launched a series of wildcat strikes in July against the company's newly implemented Integrated Working Hours System (IWH System). The strike began with two stores in Nanchang on 1 July 2016, with the Chengdu and Harbin stores joining in on 3 and 4 July 2016 respectively. The Chinese employees were concerned that after the new working hours system was implemented, the company would cut overtime payments for employees. The strikes ended in the first week of July after Walmart store managers told striking workers that the management would address and respond to their issues and concerns. Walmart management later decided that employees could elect whether to participate in the IWHS or maintain their original Standard Working Hours System (SWH System).

SWH System v IWH System

The Chinese working hours systems are unique. According to Article 36 and Article 38 of the PRC Labour Law, the SWH System shall mean each employee works eight hours a day (i.e. 40 hours a week), and each employee shall have at least one day as a rest day per week. Employees who work more than the statutory working hours are to be paid for overtime according to law. The SWH System is currently the most widely used working hour system in China and is generally accepted by enterprises and their employees.

The IWH System is a comprehensive calculation of working hours, with a weekly, monthly, seasonal or yearly cycle. The average daily working hours and average weekly working time should be basically the same as with the SWH System. However, under the IWH System, enterprises will enjoy greater flexibility in arranging their employees' working hours, as store managers are permitted to allocate workers any number of hours per day without paying overtime as long as it does not exceed the total permitted working hours in a particular cycle.

For example, under the IWH System of a weekly cycle:

The actual working time of the employees on a specific day can be more than 8 hours, but the total weekly working time within the comprehensive calculation cycle shall not exceed the statutory maximum of 40 hours.

If it is more than 40 hours a week, it shall be deemed to prolong the working time, and the enterprise is required to pay overtime which is not lower than 150% of the wage regardless of whether it is a working day or rest day.

If the enterprise arranges work for an employee during a statutory holiday, regardless of whether the sum of the entire cycle of working time exceeds the statutory standard working time, the enterprise is required to pay overtime which is not lower than 300% of the wage.

The average number of prolonged working hours must not be more than 36 hours per month (i.e., nine hours per week), otherwise the company will face the risk of being punished by the labour supervision department.

Advice for Employers

The strike by Walmart employees serves a good lesson to global enterprises (and non-global ones) operating in China: that they should undertake planning and consultation before making any substantial changes. Before implementing substantial changes, global enterprises should:

Consult and agree with the employees in advance According to Article 4 of the PRC Labour Contract Law, when an employer formulates, revises or decides on rules or major matters pertaining to labour remuneration, working hours, rest periods etc., which directly affect the vital interests of employees, such changes are required to be discussed with the employee representatives congress or all employees in order to seek their opinions before such changes shall become effective. Global enterprises are required to undertake sufficient consultation with the employees in order to reach a consensus with the employees in advance.

Obtain the prior approval from the Labour Bureau According to Article 39 of the PRC Labour Law, changing from the SWH System to IWH System must be approved by the Labour Bureau. Therefore, obtaining the approval from the Labour Bureau before the global enterprise announces any changes to the working hours system is necessary.

Plan for a strike strategy between the global management and the Chinese workers association or local management Discussion between the global management and the Chinese workers association or local management should be conducted before any implementation of the labour system in China in order to formulate a strike strategy in case it occurs. Failure to do so may have a negative impact on the reputation of the global enterprise in China.

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